SO2 and OTC NOx EA Market Price Indices August 25, 2000

August SO2 and NOx EA MPI Headlines SO2 EA MPI Up 3.11% NOx Prices Slip CT Proposes NOvel NOx & SO2 Regs What are the Cantor Fitzgerald SO2 and NOx MPIs? The Cantor Fitzgerald Market Price Indices (MPIs) are prices that reflect current market conditions for Clean Air Act Title IV SO2 and Ozone Transport Commission NOx emission allowances. The MPI is an average of the following three numbers (where available) (Note: fees and commissions are not factored into the MPI): Recent price - prices from the most recent transactions (sales, swaps, and options) either executed by Cantor Fitzgerald and/or reasonably believed by Cantor Fitzgerald to have occurred. Also note that the MPI does not include transactions that are reported as retirements or facility changes of ownership because such transactions may not be reflective of current market conditions. Lowest offer price - lowest price, reported to Cantor Fitzgerald, at which a seller is willing to sell. Highest bid price - highest price, reported to Cantor Fitzgerald, at which a buyer is willing to buy. Note: All information contained here is obtained by Cantor Environmental Brokerage (Cantor Environmental Brokerage) from sources believed to be accurate and reliable. However, because of the possibility of human and mechanical errors, as well as other factors, such information is provided "as is" without warranty of any kind and Cantor Environmental Brokerage, in particular, makes no representation or warranty as to the accuracy, timeliness, or completeness of this information. Under no circumstance shall Cantor Environmental Brokerage have any liability to any person or entity for (a) any losss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling interpreting, analyzing, editing, transcribing, transmitting, communicating, or delivering any such information, or (b) any direct, indirect, special, consequential, or incidental damages whatsoever even if Cantor Environmental Brokerage is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, any such information. The data and information contained herein are, and must be construed solely as statements of opinions and not statements of fact or recommendations to purchase, sell, or hold SO2 or NOx EAs. All prices are merely indications of interest, do not represent firm bids and offers, and their terms are subject to change without notice. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH DATA OR INFORMATION OR OTHER OPINION IS GIVEN OR MADE BY Cantor Environmental Brokerage IN ANY FORM OR MANNER. SO2 MARKET PRICE INDEX and NEWS: (Call 212 938-4250 or 800-228-2955 ext 5 for description) View SO2 MPI History Bids Offers Trades AUGUST MPI Price/Volume 2,500 @ $153.50 ======== 2,500 @ $154.00 ======== not listed ============ Weighted Average $153.50 $154.00 $150.99 $152.83 * Bid and offer for vintage 2000 allowances. Immediate Settlement: Period of Stream Best Prices ($/Allowance) Maximum Volume Term Start   End Bid to Buy Offer to Sell Bid Offered   1 year 1 year 1 year 1 year 1 year 2000 2001 2002 2003 2004 $146.00 $144.91 $144.20 $142.44 $141.06 $148.00 2,500 2,500 2,500 2,500 2,500 $2,500 Allowances Allowances Allowances Allowances Allowances Swaps: Swap Ratio's against vintage 2000 allowances 2001 2002 2003 2004   Offer 0.75% 1.25% 2.50% 3.50% Ratios for base years other than 2000 are available upon request. DISCLAIMER: ALL PRICES ARE MERELY INDICATIONS OF INTEREST, DO NOT REPRESENT FIRM BIDS AND OFFERS AND THEIR TERMS ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE ABILITY TO EFFECT TRANSFER OF ALLOWANCES IS SUBJECT TO THE FINAL PROCEDURES GOVERNING THE TRANSFER OF ALLOWANCES WITHIN THE ENVIRONMENTAL PROTECTION AGENCY'S ALLOWANCE TRACKING SYSTEM. SO2 EA Market Beat The Cantor Fitzgerald SO2 EA Market Price Index increased by 3.11 % this month to $152.83 from $148.22 in July. Market participants managed to drive SO2 prices higher throughout this month, with the heaviest trading reported on August 15th because of option expirations. The trading range this month was $147.75 to $155.25. The last trade went off at $154.00. As always Cantor Fitzgerald does not trade for its own account. All allowances purchased in the auction or traded in the open market are for our clients. It is Cantor Fitzgerald’s policy to keep the identity of our clients and their positions in the market in strict confidence.

NOx Prices Slip
The NOx EA Market for the month of August experienced a decrease in trading volume and prices. Very few buyers entered the market, and a number of events may be the cause. First, consider the weather -- we have had balmy, 70 degree summer days, many of those cloudy and/or rainy. Electricity use (associated with air conditioning and load loss, for example) has not been as anticipated. As a result, many electricity generation units have not been running anywhere near normal capacity (let alone increased capacity). Thus, NOx emissions could be down for the season. In addition, July and August saw many on vacation, with their resulting absence creating a lull in the market. Prices reached a low of $615/ton at the time of printing. Stay tuned….

CT Proposes Novel NOx & SO2 Regulations
On August 11, 2000, in response to an Executive Order from Connecticut’s Governor Rowland, the Connecticut Department of Environmental Protection (CTDEP) proposed: (1) revisions to their NOx and SO2 regulations, and (2) a September 21, 2000 public hearing. Proposed amendments to RCSA Sec. 22a-174-19 require facilities to retire 1 ton of SO2 allowances for each ton emitted (consistent with existing federal law), as well as an additional 1 ton of SO2 Allowance for each ton emitted (a total of 2 tons of allowances/1 ton emitted). In addition, after December 31, 2002, sources must comply with new, more stringent limits on SO2 emissions, or as an alternative, purchase 1 SO2 DER or 4 SO2 Allowances per ton emitted that exceeds the regulatory requirement. CTDEP has also proposed revisions to its NOx regulations. The proposed rules establish new, lower NOx emission limits specific to certain sources. They also reinforces the state’s annual NOx trading program by allowing the use of NOx Allowances and/or NOx DERs during the nonozone season (October 1 – April 30).

SIP Call NOx Allowance Market?
The market saw: (1) a bid increase $300/ton to $3000/ton for up to 500 tons, and (2) an offer at $5,000/ton. The 2003 market has begun. Traders are closely watching this emerging market, and a few folks have already expressed interest in NOx for SO2 swaps, although no trades have occurred yet. The market experts at Cantor Fitzgerald would be happy to offer our expertise in emissions trading to aid in your planning. Please don’t feel that you may only call us when you want to trade; we are an information resource for you. Please call 1-800-228-2955 ext.5 for Laurie Gage or ext.6 for Andy Kruger.

SO2 Prices Relatively Stable - Is $160/ton Far Away?
SO2 EA prices continued to show a good deal of volatility. During August, the SO2 EA market again saw trades as high as $155.25 with a low of $147.75, before ultimately cycling below that level. At the close of today’s market, the bid was $153.50 and the ask was $154. The month’s activity in terms of price followed last month’s limits for the most part.

Want to learn more about emissions trading?
Why not attend one of the many conferences featuring Cantor Fitzgerald speakers? Here's jsut one upcoming event that you may wish to check out:

• September 25-27, 2000 Financial Times - Energy presents PJM Power Markets
• October 16-19, 2000 2000 Financial Times - Energy presents PowerMart
• October 18-20, 2000 FORBES Magazine Environmental SuperConference

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